Venture building: new standard for innovation capability building

In the 60′ the average life span of companies was over 50 years. That number has dropped to less than 15 years. In some countries even less. Today, corporate innovation isn’t simply about creating new value. Now it’s a necessary investment to react to changing trends and resist disruptive threats. The pandemic proved that there’s a need for a more agile approach and speed in response to what the world throws at us. The spotlight shines on corporate venture building – another strategy in the innovation playbook.

In corporate venture building, established companies build a separate venture from scratch. A new brand, team, revenue stream, or profit-and-loss is created to target untapped opportunity spaces – wherever that is the new customer segments, technology or capabilities – all outside of the existing business.

What is corporate venture building?

Venture building is an increasingly popular approach, it become a prim for brands like Google or Microsoft. Profit is one reason. Research shows that long-term diversification outperformed companies. And bigger corporations have already the assets and resources – pairing that with the agility of startups, unlocks major growth.

Unfortunately, these great returns of venture building are unfamiliar for many companies. So we are here to explain its greatness.

Different pathways

Corporate Innovation Labs

We can observe the growth of many innovation labs during the last 5 – 10 years. In the labs, cross-functional participation among rainmakers can result in new ideas and concepts within the corporation.

The cons are that these ideas aren’t always implemented as existing business priorities draw more attention. That way, ideas often spin around improving existing products and services instead of breaking new ground and implementing innovation in other areas of business. Because yes, there’s much more to do than product innovation… Anyway, to go away from the “innovation theatre” you need a strong and clear strategy.

Corporate Venture Capital

Corporate venture capital is another method, where time and capital are invested in promising startups that pave the way for new markets or technologies.

Note that these initiatives can require bigger investment and face integration challenges. Mostly because the startup and corporation have different cultures and governance styles that need to be bridged carefully.

Corporate Venture Building

Let’s skip to the good part. Corporate ventures are fully aligned with the corporation’s mid-to long-term interests from the start. This puts away the problem of integration.

The venture team can make decisions fast with startup agility, and without the challenges of a corporate hierarchy. That way can deliver faster returns on investment. Isn’t that what we all want?

The team has the mandate to explore revolutionary ideas and business models that solve new customer needs, helping the company diversify from the risks of disruption. Moreover, bringing these ideas into a new-named brand helps win over new customers aside from existing perceptions of the core business.

No matter what happens in the little head of yours, you must first define your strategy and intent. In our experience of working with numerous fashion brands, companies with a higher innovation maturity are most suited for corporate venture building. Because success in corporate venture building isn’t measured by traditional metrics, but mostly by a readiness to “test fast, fail fast”. These vivid small companies are also more likely to see failed ventures as valuable lessons that bring them closer to the real breakthrough. Know this, viewing failure as a bad outcome holds employees back from experimentation and risk-taking. So instead of perfecting a single result (concept, product), venture building rapidly iterates one product after another in search of product-market fit.

In venture building, results are not always immediate or visible. What’s more, there are financial risks that need to be made over an extended period of time. On top of that certain corporate cultures may also experience higher levels of power distance – it happens when employees defer to management direction and stick closely to the assigned tasks. In those companies, employees don’t speak honestly and openly about ideas.

There is no one-size-fits-all model for corporate innovation or anything else in business. But with the right mindset, businesses can use venture building to do much more than win market share and unlock innovation of organisation. They may also propel the next unicorn from within.